RBI won't keep interest rates high longer than needed
RESERVE Bank of
SLR is the portion of deposits that banks are required to invest in government bonds and hence these funds cannot be given out as loans to corporates and individuals for buying homes and cars. The reduction in SLR by 0.5 per cent to 22 per cent of total bank deposits will release funds that are otherwise stuck in government bonds.
Rajan said that there are upside risks to inflation in view of the uncertain monsoon and its impact on food production as also volatile international oil prices.
Rajan hinted at more SLR cuts in the future in tandem with government action on the fiscal deficit to help lenders plan for the long- term. " This is an antiinflation fight, and let us win it because that will create the best conditions for sustainable growth," Rajan, who raised the key rates twice since assuming office last September, said.
Sounding confident of achieving the inflation targets, Rajan said, " I think the expectation that we will confront and deal with inflation is much stronger now than it was earlier." Consumer price index inflation dropped to 7.31 per cent in June from 8.59 per cent in April.
Noting that foreign investors are worried over high inflation, Rajan said one of the major concerns that investors have is whether RBI will take away the benefits of the Indian growth story from them by inflating economy and thereby depreciating the rupee. " No, we have no intent of doing that. We want to bring inflation under control and more like the inflation in other countries so that the rupee is not seen on a continuously weakening path," he said.
RAJAN WARNS OF WITCH- HUNT
RBI has initiated inspection of the book of accounts of
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